Settled advance from contingent interest trust

I have a trust where an 11 year old will receive a share of her grandfather’s estate contingent on attaining the age of 21. She is severely disabled and has the developmental age of 2. Once she turns 18 she will be assessed financially for her care and she is never going to be able to manage money or give a valid receipt at 21. In the past, I have looked into the circumstances under which is might be permissible for trustees to make a settled advance. Ideally, the trustees would wish to advance her interest onto a disabled person’s trust. Under the circumstances, I think the trustees can show that it is in her interests to make such an advance. Do forum members agree?

Lorna Sansom
Blandy & Blandy LLP

I would use s32 trustee act to advance as you suggest provided it has been widened to the whole presumptive share

Simon Northcott

I assume that you have taken medical advice and that the file reflects that. In the circumstances that you describe I would agree that a settled advance could be appropriate.

That said, I might wait until the beneficiary is closer to the age of 18, especially if there is any possibility that a new treatment in the next few years could help. I would not want the trustees to appear to be making an unduly hasty settlement.

I would also want to show that they had considered the alternatives. If the beneficiary’s parents will be obtaining authority to manage the beneficiary’s affairs when she turns 18, for example, then when she becomes absolutely entitled to the funds it would presumably fall to the parents, as deputies, to manage those funds. Is this less satisfactory than a settled advance?

The answer will depend on the circumstances, of course, but if the beneficiary has no other assets at this time, then it could be argued that the settled advance might negate the need (and cost) to obtain a deputyship order, at least at this stage.

Taurean Drayak
Elliot, Bond & Banbury

In my lowly opinion, the key remaining point here is the extent to which funds directly owned by the beneficiary would be taken into account for the purposes of funding care. A deputyship does not change that. So if the inheritance is at risk of being eaten up by care costs, it would be better to make a settled advance.

STEP has queried whether a Disabled Person’s Trust should indeed be regarded as separate from a person’s own funds for the purpose of financial assessment for care costs (given the terms of the trust) – the point has never in my experience been taken further but it should perhaps be a consideration of the trustees when debating what kind of settled advance should be made.

As to the medical report, given the gravity of the child’s disability, getting her from where she is now to managing her own money seems unlikely within the time frame, as we are nowhere near any form of cure for such global impairments and in addition, she will have missed so many developmental windows during her life already. The medical report could give a prognosis and this should be a good basis for the trustees’ decision.

Additionally, action now might secure a form of advance which might not be available in the future.

Jill MacMahon
Thackray Williams LLP

Furthermore, in a nod to Simon’s point, if the grandfather died after 1 October 2014, s 32 will have been widened by the Inheritance and Trustee Powers Act 2014 so that it extends to the whole of child’s presumptive share.

Jill MacMahon
Thackray Williams LLP